How much house can I afford with a conventional loan?
Conventional loans are popular for borrowers with credit scores of at least 620 and DTI ratios of 45% or less (though exceptions are possible up to a 50% DTI ratio). Some conventional loan programs allow down payments as low as 3%, but you can avoid mortgage insurance if you make at least a 20% down payment. Conventional lenders often charge mortgage insurance to cover their losses if you default, and it’s usually part of your monthly payment.
How much house can I afford with an FHA loan?
First-time homebuyers with bumps in their credit history often choose loans insured by the Federal Housing Administration (FHA) to purchase a home. Borrowers with credit scores as low as 580 may qualify with a 3.5% down payment, while a score between 500 and 579 will require at least a 10% down payment. One big FHA loan drawback: You have to pay mortgage insurance regardless of your down payment, which may hamper your ability to buy a more expensive home.
How much house can I afford with a VA loan?
Eligible military borrowers often choose VA loans because they don’t require a down payment or mortgage insurance. While the U.S. Department of Veterans Affairs (VA) doesn’t set a minimum credit score, most VA-approved lenders require at least a 620 score. VA borrowers may have to pay a funding fee of up to 3.6% of their loan amount, unless they are exempt because of a disability related to their military service.
THINGS YOU SHOULD KNOW
The VA loan program is the only standard loan type that considers “residual income,” which is how much free cash you have after deducting expenses from your take-home (after-tax) pay. VA-approved lenders also use residual income to determine how much you can afford, VA-approved lending guidelines suggest a 41% maximum DTI ratio, but if you meet the residual income requirement, you may be approved with a higher DTI ratio.
How much house can I afford with a USDA loan?
Low- to moderate-income homebuyers searching for houses in USDA-designated “rural” areas may qualify for no-down-payment financing. The minimum score is typically 640, and buyers pay an annual and upfront guarantee fee instead of mortgage insurance. Strict income limits may cap how much home you can buy with a USDA loan, even if you meet the standard 41% DTI ratio requirement.